Market Commentary - Housing, Infrastructure, Construction and Services
News this morning comes from Lavendon and Severfield. Lavendon has received an offer from the French hire company Loxam of 220p a share which has been recommended by the board and tops the TVH offer by 10p.There was limited movement in sector stocks yesterday
News this morning comes from Lavendon and Severfield. Lavendon has received an offer from the French hire company Loxam of 220p a share which has been recommended by the board and tops the TVH offer by 10p. The offer represents a 58% premium to the undisturbed closing price on 21st November when the bidding “war” with TVH commenced. TVH has announced that it has set aside its statement that it will not increase its offer and is considering its options. Severfield has provided the strongest reasons to date for its JV in India with the statement this morning that it has won £29m of new work in four location in the country. The release points to the strengths of the Indian operations design work as well as it fabrication and site erection capabilities. These contracts probably signals a turning point in the Indian JV which having reached good profitability last year though sit still carries a high level of debt; these new contracts should enable the operation to kick on in terms of growth and tackle some of the debt. This is good news for Severfield which follows its recent very positive half year results and shareholders may start to see some return from the Indian investment which so far has been “patient capital”.
There was limited movement in sector stocks yesterday with Compass rising 2.7% to 1390p, closely followed by G4S which has been under pressure in recent weeks, which rose 2.5%. The former is down from recent peaks of around 1550p reached when £1 was at $1.20; the FX rates have stabilised recently at $1.26 and so too has CPG’s share price, at the 1400p level. While it may be highly valued at 19.6x current year earnings views remain positive as the management keeps delivering good growth and margins are edging northwards.
Mears was the back marker, down 2.6% on 105,859 shares traded. At 432p the shares are below recent peaks but have remained strong since the Referendum. The move yesterday was just the weight of trade on the day. Market trends are heading in the company’s favour with increased spend on Social Housing and rented accommodation generally and with a recognition that in the UK Care for the disabled and elderly is chronically underfunded. The business is evolving swiftly to market changes and is growing in areas such as student accommodation and management of registered providers operations as well as maintaining high levels of efficiency in its core maintenance business. EPS this year is expected to be around 33p and 36p next year. The restructure of the Care operations is progressing, we understand and that will be very positive next year. There is every reason to remain positive on Mears.
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